Energy deal unveiled
Premier Oil and Chrysaor create biggest indy oil firm
Premier is to merge with Harbour’s UK operating company Chrysaor, creating the largest independent oil and gas company listed on the London Stock Exchange.
The all-share deal will create a company with combined production of over 250 kboepd (as at 30 June 2020).
In a statement the companies said the merged entity will have significant scale and diversification through the combination of production hubs in the UK North Sea, although analysts also see it as a rescue of highly-leveraged Premier.
The group will have combined 2020 H1 revenue of $1.76 billion and H1 EBITDAX of $1.27bn.
The deal will be classed as a reverse takeover that will retain Premier’s London listing.
A cash payment of $1.23bn will be made to financial creditors of Premier and its subsidiaries.
Premier’s stakeholders will own up to 23% of the combined group and Harbour and other Chrysaor shareholders owning at least 77%.
Premier’s shareholders are expected to own up to 5.45%.
Chrysaor’s largest shareholder, Harbour, is expected to own up to 39.02%.
The board will comprise 11 directors including six independent non-executive directors and three executive directors including Linda Z. Cook (currently CEO of Harbour) who will be CEO and Phil Kirk (currently CEO of Chrysaor) who will be President and CEO Europe; the two other non-executive directors will be appointed by Harbour.
Russ Mould of AJ Bell, said: “After a long period where it felt like the business was, by necessity, being run in the interests of its creditors rather than its shareholders Premier Oil has effectively been put out of its misery.
“The company’s problems date all back to 2014 and the oil price crash which occurred that year. It simply had taken on too much debt when oil prices were above $100 per barrel and has been running to stand still ever since.
“Against this backdrop the tie-up with private equity-backed operator Chrysaor is more of a rescue mission than a merger of equals.
“With a big chunk of Premier’s debt being paid off on completion it certainly looks more sustainable than the previous plan to load up on more debt, ask for more money from the market and buy assets from BP to generate the cash flow to pay down borrowings.
“The new deal may create the largest independent UK oil company with output of a quarter of a million barrels of oil equivalent per day, but existing Premier shareholders will only own a very modest slice of this enlarged pie.
“Premier serves as a salutary lesson about the risks of becoming overly leveraged when you are exposed to the price of a highly volatile commodity.”
Stuart Lamont, investment manager at Brewin Dolphin, said: “After a particularly volatile period for Premier Oil shareholders, the deal with Chrysaor should provide a degree of certainty following years of speculation about the company’s future.
“While Premier shareholders will be heavily diluted by the agreement, the merger effectively solves Premier’s longstanding debt problem which had become a perennial drag on the company.”